Brooklyn man pleads guilty to insider trading and tax evasion

March 30, 2022 Brooklyn Eagle Staff

The U.S. District Court for the Eastern District of New York, more informally known as Brooklyn Federal Court, in Downtown Brooklyn. Photo: Rob Abruzzese/Brooklyn Eagle

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Jason Peltz pleaded guilty Tuesday in Brooklyn Federal Court to securities fraud and tax evasion in connection with an insider trading scheme in which Peltz executed securities transactions based on material non-public information (MNPI) from a company insider. The proceeding was held before U.S. District Judge Nicholas G. Garaufis, EDNY.

When sentenced, Peltz faces up to 25 years in prison, forfeiture of his ill-gotten gains, and restitution to the Internal Revenue Service (IRS) of over $1 million, according to the U.S. Attorney’s Office for the Eastern District of New York.

In February 2016, Peltz obtained MNPI from an insider at Ferro Corporation about a potential takeover offer. Peltz used that MNPI to:

Profitably trade in Ferro in the brokerage accounts of two co-conspirators;
Tip off other individuals, each of whom also profitably traded on MNPI about the Ferro takeover bid; and
Tip off a reporter, who wrote an article making public the news of the Ferro takeover bid, which resulted in an increase in the price of Ferro’s stock.

Peltz and the Ferro insider each received significant financial benefits from other co-conspirators shortly after Peltz traded in those co-conspirators’ brokerage accounts, and Peltz continued to receive large payments from co-conspirators, as well as other benefits, as payment for his trading activity, the U.S. Attorney’s Office said.

b_judge nicholas garaufis.jpg — U.S. District Judge Nicholas Garaufis, EDNY. Eagle file photo by Jennifer MacFarlane

Peltz directed that these payments be made to corporate and nominee bank and credit card accounts in order to conceal his income from the IRS. Despite receiving such payments, in 2017 Peltz falsely swore under penalty of perjury to the IRS that he had been unemployed since December 2015 and had no income.

Breon Peace, U.S. Attorney for the Eastern District of New York; Michael J. Driscoll, Assistant Director-in-Charge, FBI, New York Field Office; and Thomas Fattorusso, Special Agent-in-Charge, IRS Criminal Investigation, New York, announced the guilty plea.

“With today’s plea, Peltz admitted to trading on material non-public information about a publicly traded company to line his own pockets and also to lying about his income to avoid paying taxes on a substantial tax liability,” said Peace. “This office will vigorously prosecute traders who seek to cheat the system, harm the investing public and undermine the integrity of our financial markets.”

“Plain and simple: It’s illegal to use non-public information to buy and sell stocks. Doing so manipulates the markets and can have detrimental effects on the wallets of individuals who play by the rules. But this defendant didn’t stop there, he made significant financial gains and then claimed that he had no income in an effort to blatantly evade taxes,” stated IRS-CI Special Agent-in-Charge Fattorusso.

The government’s case is being handled by the office’s Business and Securities Fraud Section. Assistant United States Attorneys Kaitlin T. Farrell, Sarah M. Evans, and Special Assistant United States Attorney Barry O’Connell are in charge of the prosecution, with assistance from Assistant United States Attorney Brian Morris of the Office’s Asset Recovery Section.